Cognition / Perception Seminar Events

Mike Tombu (Defense Research and Development Canada - DRDC)

Abstract:

Risk attitudes are often inferred from the outcome variance of the preferred option in risky choice decision-making problems. Preferring the high outcome variance alternative implies risk seeking, whereas low outcome variance preferences are attributed to risk aversion. Framing decision options in terms of their positive or negative aspects has been shown to result in preference reversals that have been attributed to shifts in risk attitude, but these conclusions hinge on equating risk with outcome variance. In two experiments, I show that when the standard outcome-variance metric is used, framing effects were sometimes observed, sometimes absent, and sometimes reversed. However, when risk attitude was inferred from subjective measures of risk, virtually no framing effect was observed. Framing did, nonetheless, affect which option participants found to be more risky. The implications these results have on risk attitudes and perceptions are considered.